The private members’ club opens its doors to the public


When Soho House announced its entry in New York in June, CEO Nick Jones received an email from the club’s fifth member.

Screenwriter Greg Hunt wrote that he was sitting at the first Soho House bar in central London.

With more than 119,000 members 26 years later, the company owns 30 Soho Houses in 12 countries and earned a valuation of $ 2.8 billion on Wednesday. A group of private member clubs raised $ 420 million through an initial public offering and sold the shares for $ 14 a share, the lower end of what they could sell to investors.

“I never imagined I was sitting here with the FT on a Monday morning pre-float,” said 26 years ago after renting three adjacent buildings above the Soho Café Boheme restaurant. Jones, who started the members’ club, said. .. “I wanted to survive 1995.”

Targeting the “creative,” the company scaled up with model Kate Moss and singer Pixie Lott as members. The list was renamed Membership Collective Group to recognize other brands such as London city hotel Zaned and Scorpios Beach Club in Mykonos.

What hasn’t improved significantly is Soho House’s bottom line. It was never profitable and instead grew thanks to high loans and well-funded shareholder investments. Jones abandoned previous listing attempts in 2018. These potential investors said they were unaware of the benefits of the underwriting model.

During the pandemic, restrictions shut down the club and MCG laid off around 1,000 of its 6,100 employees. According to the company, customers could freeze their memberships, with just 8% of their members canceling.

But even before Covid-19, the income statement looked awkward. Between 2018 and 2019, pre-tax losses increased 37% to $ 123.5 million and revenue increased 12% to $ 642 million. Last year’s revenue fell 40% to $ 384 million, a loss of $ 236 million.

The company reviewed the cost structure and Aggressive growth strategy To attract investors. Aiming to generate a net profit by 2022, the United States is listed in New York City with 41% of sales and members pay around $ 3,400 per year. This is the highest price for the whole group.

Nick Jones opened his first Soho House in 1995 atop his Café Boheme restaurant in Soho, London © Peter Nicholls / Reuters

American ambition

The United States is also home to the billionaire retail billionaire Lombard, MCG’s largest shareholder. Lombard owns 53% of the company before the float and holds preferential voting rights, along with Jones and hospitality entrepreneur Richard Curling.

According to Jones, up to 7% of the shares for sale were reserved for members, and about a quarter had recorded interest.

By 2024, MCG plans to open a home in Nashville, Portland, a second home in Hollywood, a ranch in California, a beach house in Palm Springs, and a Ned branch in New York. We acquired the American boutique hotel group The Line in June and plan to open the Line Hotel in San Francisco next March.

Jones said the secret to breaking into the United States was “not so eager to fail.” Launching in New York in 2003 could mean that “the company just beat us and couldn’t survive and thought the risk was worth it”.

After WeWork, MCG also entered the shared office business with eight locations in London, Los Angeles and New York. Nonetheless, the outlook indicates that it has no “single direct competitor” except for local clubs and coworking spaces in individual cities. He claims to belong to “one industry”.

Debt burden

Of the $ 450 million that MCG wants to raise, it will use $ 223 million to pay off some of its $ 600 million net debt. Interest payments will cost 41% of income in the first quarter of this year. In March, he replaced the $ 345 million facility with Buyout Group Permira, borrowed a £ 560 million loan from Goldman Sachs at an 8% interest rate and settled $ 79 million in accrued interest.

“The main reason for signing up is to pay off this debt. It’s really not necessary for capital investment, ”said Andrew Carney, global president of MCG.

To achieve the goal of five to seven new Soho Houses each year, the company uses an “asset light” approach in which property owners pay the opening costs.

MCG plans to increase its members’ income from 26% to over 50%. The other income comes from inside food and beverage sales and a line of interior products that will open its first studio in September. Of course, there are also memberships that come with it.

Bernstein analyst Richard Clarke said MCG’s recurring revenue subscription model was providing valuable lessons for other hotel groups outside of the pandemic. .. .. Suggest customers to prepay for status, special experiences and benefits. ”

He added that the young bias of the Group’s customers “should continue to be a strong demand for these subscription-type subscriptions”.

For Jones, adding membership to any brand is a clear choice, and he plans to offer this service to other businesses.

US members pay around $ 3,400 per year, the highest fee for the entire group, to join MCG clubs such as Soho House in Austin, Texas.

US members pay around $ 3,400 per year, the highest fee for the entire group, to join MCG clubs such as Soho House in Austin, Texas © Cristina Fisher / Soho House

Even subscribers can request

Pierre Dourneau, North American Managing Director of MCG who joined Café Boheme as a waiter in 1995, said Jones is “non-stop” and that the entrepreneurial spirit of the company means “if you will. love ”. .. .. You will have a hard time. Some staff will stay 3-4 months. Others, like Dourneau and another longtime employee Vanessa Xuereb, director of membership, love “organized unrest.”

However, a former employee of the design team said the speed of growth meant the manager “didn’t care what to do.” [but] There was little feedback and I could barely figure out what to do. “

Ben Silbermann, American producer Office Member since 1996, he declares to appreciate the friendliness of the club. .. “

However, some members fear that rapid expansion will reduce the value of their membership. “The Soho House is still attractive, but it’s watered down,” said a London member for more than three years.

Everything to ensure that the MCG is “a local club for local members, not a temporary club for people who may not have lived in the city for a long time,” Jones said. He said he made an effort.

When it comes to standards, he said, even bankers can participate if they have a “creative soul.”

The private members’ club opens its doors to the public The private members’ club opens its doors to the public


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